Relevant and even prescient commentary on news, politics and the economy.

Marxism-Leninism And The Chinese Communist Party Congress

Marxism-Leninism And The Chinese Communist Party Congress

At this moment I am watching live on Bloomberg News the opening speech by President/Party General Secretary/Chairman of the Military Commission Xi Jinping of the once-every-five-years Chinese Communist Party Congress.  This is far more important than what one finds on other TV networks whether pro-Trump right now (how great his tax plan/tromping on immigrants and football players are) or anti-Trump (what is the latest gossip from the Mueller investigation and will Republicans in the Senate stand up to Trump).  A major theme seems to be a reassertion of party power and discipline, with a reinvigoration of the State-Owned Enterprises, with Communist Party cells to operate in nominally private enterprises, socialism with Chinese characteristics, with a reaffirmation of the foundation based on Marxism-Leninism.  Yes, he used that term.

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Senate to Vote on Budget Resolution

A couple of weeks ago, the House passed a Tax Reform Budget Resolution. Today, the Senate will take a vote on its Tax Reform Budget Resolution. Once passed, the differences will need to be resolved by both legislative bodies. President Trump met with the Senate Committee which included 6 Democratic Senators of which 5 are up for re-election in 2018. Trump impressed upon Senator Wyden the need for support of the Republican Tax Reform measure.

Except the call by President Trump did not get a favorable response. Senator Ron Wyden of Oregon called the President and the Republican’s bill a “con job” stating; there is a Grand Canyon-sized gap between the rhetoric surrounding this plan and reality.”

All the happy talk about helping the middle class and avoiding a giveaway to the wealthy sounds great, but it is not what the White House and Republicans have on offer.”

Going forward, the content of both Resolutions will have to be reconciled and the differences between the House and the Senate’s Tax Reform Budget Resolution assumptions resolved. The House Resolution assumes the tax plan will generate economic growth and calls for $203 billion in miscellaneous spending cuts over a decade, while the Senate Resolution assumes no economic growth and creates a deficit of ~$1.5 trillion over a 10 year period. Most likely, greater importance will be placed on the Senate’s Resolution by Republicans due to their slim majority. Passing Tax Reform before 2018 elections has taken a priority for Republicans after doing so poorly with revising, repealing, and/or replacing the ACA. Little concern is given to its long term impact. In the end and the same as the 2001/2003 tax breaks, any deficits created after 10 years result in a sunset of the bill.

After the House and the Senate agree on a Budget Resolution, the House Ways and Means Committee will release a detailed tax bill and schedule a committee vote. The Tax Reform bill will go to the House and the Senate to be passed under Reconciliation rules (a majority) vote disallowing a filibuster effort by the Dems in the Senate. This will be the same as what occurred with the ACA although the Republican Senators who opposed the ACA legislation such as Collins and McCain will support Tax Reform.

More to come.

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Iraq Conquers Kirkuk

Iraq Conquers Kirkuk

The central Iraqi government based in Baghdad has conquered oil-rich and ethnically-mixed Kirkuk from its recent Kurdish rulers, who hoped to continue ruling it as part of their recently declared independent state of (Iraqi) Kurdistan, clearly consisting of three provinces, but which they also wanted to include the fourth one of Kirkuk province. This now appears not to be going to happen.

Juan Cole has made an excellent discussion of this, noting 7 reasons why this is not about Iran as many commentators in the US claim. I shall not repeat most of his arguments here but suggest people look at the link. I shall note the crucial point that what looked like it was going to be a major military conflict over Kirkuk thankfully turned out not to be is that the Kurdish Pesh Merga, who were ruling Kirkuk, actually are tied to the main opposition party in Kurdistan, the Patriotic Union Party (PUK) led by the Talabani family,whose old patriarch, once a president of all of Iraq, has just died. The Pesh Merga has simply withdrawn peacefully from Kirkuk, handing a major embarrassment to Massoud Barzani, the current president of newly independent (maybe) Kurdistan, who leads the center right Democratic Party of Kurdistan (DPK). This suggests that while the opposition nominally supported Barzani’s independence referendum, they lack enthusiasm, and Barzani may end up in trouble as things are not going well with this. As I noted in a previous post, Barzani is in a tight position because he canceled an election in 2015, and Kurdistan’s economy has been weak due to low oil prices.

I also add that apparently the fall of Kirkuk temporarily shuts down 350,000 barrels of oil per day production, which will add to the ongoing increase in world oil prices.

Barkley Rosser

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WA Senator Murray Thinks She has a Deal to Save the CSR

Sen. Lamar Alexander (R-TN), chairman of the Senate health committee, said he hopes to release a bill this week, in collaboration with Sen. Patty Murray (D-WA), the senior Democrat on the committee, to fund the cost-sharing reduction payments and give states more leeway on insurance rules.”

Not sure why Senator Murray feels the need to go down this avenue when the preceding Executive Order already wandered into greater flexibility for states, states rights, and who decides what. As has been explained by the CBO, Drum, other pundits, and myself; the loss in out-of-pocket subsidies will result in increased premiums which are “still” paid for by the ACA between 138% and 250% FPL. In some cases, Bronze plans can be had for free, Silver plans become cheaper, and Gold plans offering better care and lower deductibles attainable.

Senator Murray is giving away the store if what Senator Alexander says is true. “Alexander said Murray agreed to a deal giving states ‘meaningful’ flexibility on coverage rules. Asked what the stumbling blocks to the deal are, Alexander replied: ‘The definition of meaningful.'”

We have already seen what the word meaningful means with regard to the expansion of Medicaid in some states . . . it never happened. I am hoping Senator Murray has second thoughts and decides not to go farther with her thoughts on negotiating with the Republicans as she is off base and we will be better off by not altering what is law already and it is the ACA.

Premiums will go up in 2018 as no one is going to trust Trump regardless of any deal reached with the Republicans.

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The Incidence of the Obamacare Subsidies

The Incidence of the Obamacare Subsidies

Justin Fishel and Mary Bruce covers Trump’s dismantling of Obamacare:

The White House announced Thursday night that the administration will slash Obamacare subsidy payments to insurers. The “cost-sharing reduction payments,” worth an estimated $7 billion this year, are intended to reduce out-of-pocket costs for low-income Americans on Obamacare … House Democratic leader Nancy Pelosi and Senate Democratic leader Chuck Schumer issued a joint calling the action “pointless sabotage.” “Sadly, instead of working to lower health costs for Americans, it seems President Trump will singlehandedly hike Americans’ health premiums,” they said in a joint statement. “It is a spiteful act of vast, pointless sabotage leveled at working families and the middle class in every corner of America.”

Trump’s counter is that the health insurance companies are very profitable because they are reaping the benefits of these subsidies. I would argue that health insurance company profit margins are high in large part because we have not enforced the anti-trust laws and allowed a lot of market power. Brad and Michael Delong made this point last fall:

The United States’ Affordable Care Act (ACA), President Barack Obama’s signature 2010 health-care reform, has significantly increased the need for effective antitrust enforcement in health-insurance markets. Despite recent good news on this front, the odds remain stacked against consumers … It is not surprising, then, that in 2015 some of the largest private American health-insurance companies – Anthem, Cigna, Aetna, and Humana – began exploring the possibility of merging. If they could reduce the number of national insurers from five to three, they could then increase their market power and squeeze more profits from consumers.

Even five health insurance companies are two few. But suppose we did have real competition in the health insurance market – what would be the effect of subsidies. Let’s consider this primer on the incidence of taxes:

The tax incidence depends on the relative price elasticity of supply and demand. When supply is more elastic than demand, buyers bear most of the tax burden. When demand is more elastic than supply, producers bear most of the cost of the tax.

Most economists know this and we know how to translate this into the implications for the incidence of a subsidy. We have to admit, however, that Trump is really awful at economics. But he does have economic advisors. Trump is implicitly assuming a very elastic demand for health care or a very inelastic supply of health care. But where is his evidence for these claims? I guess when Kevin Hassett produces his “analysis, we might see a link from Greg Mankiw.

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Trump Fails To Certify JCPOA Iran Nuclear Deal

Trump Fails To Certify JCPOA Iran Nuclear Deal

I wish to be very precise here on this extremely important matter. President Trump has not “decertified” the JCPOA Iran nuclear deal.  Now Congress must ultimately be responsible. He has, after a lot of discussion and intervention by his national security team, failed to certify the deal.  This is not something that was part of the deal, but an epiphenomenon put in place by the US Congrees as part of a deal agreed to by former President Obama to get the deal through, a matter of every 90 days the US president certifying that Iran is complying with the agreement.  Two times running, President Trump certified it, confronted by the hard fact that Iran has been complying with the deal according to every official body in the world.  But, he has said he would not certify it, and reportedly he has blown up over this matter with screaming fits his c.  So his NatSec team has cooked up this partial save: OK, boy, fail to certify, putting it on Congress to really undo the deal.

In the face of way more to say than I shall here, let me point out odd items most will not. So one of those is a positive.  Even if the Congress fails to do what is right and reasonable and keeps the deal going, probably Iran will not pursue an active nuclear weapons acquisition program.  There are two reasons for this, which could easily be undone if Trump continues to insanely go after them.

The first is that this whole negotiation with Iran was an unnecessary farce to begin with.  Vilayet-al-faqih Ayatollah Ali Khamenei was issuing fatwas against the building of nuclear weapons as far back as the G.W. Bush admin.  Pres Bush even accepted two official National Intelligence Estimates (NIEs) that declared that Iran was not actively pursuing a nuclear weapons program. He did it twice.  The fatwas by Khomeini were the ultimate reason why these hard fought and deeply studied NIEs came forth, representing after all a consensus of every one of 17 plus US intelligence agencies, who have a wide variety of perspectives, some of them almost insanely hawkish.  But twice during the G.W. Bush presidency they came together to make this super official certification: Iran did not have an active nuclear weapons program, even though it had one earlier, one that dated back to the Eisenhower admin when the US supported their program under the Shah.  But, the bottom line is that while Khamenei is alive, there will be no Iranian nuclear program.

What this means is that ultimately Obama’s massive effort to negotiate a halt to the nonexistent Iranian nuclear program was ultimately a worthless empty exercise, much as I have on occasion praised it.  I mean, it was a noble and heroic and difficult effort,  Obama supported John Kerry in getting the Russians and the Chinese, as well as the EU and other obvious US allies, to go along with economic sanctions, which actually had an effect, given that Iran is actually a semi-democratic regime, so that even the hardliners associated with Khameini went along and agreed.  And beyond Iran, it was a big deal, the UN officially supporting it along with the Russia, China, UK, France, Germany, and the UN Security Council (oh, sorry, a part of the UN), as well as most of the rest of the world, aside from a handful of countries (not to be listed, although in most cases their intel/military support it).

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They are monsters

They are monsters

The President and his GOP majorities in Congress are monsters. As one commentator on NPR put it yesterday afternoon, the President’s default mode is to toss an armed hand grenade into a room in order to create chaos.  He can then pick out the most vulnerable, and use that leverage to enter into a win-lose deal.
Meanwhile, having been emboldened by the 2011 Debt Ceiling Debacle, the Congressional GOP majorities, who haven’t been able to legislate affirmatively, have become specialists in taking hostages and threatening to shoot them unless their agenda is enacted.
Trump and the GOP Congress combined have, as of this morning taken at least four hostages:
DREAMers – the DACA program is being terminated. After an initial claim that a deal had been made to protect young people who had been brought to the US as children and know of no other home, the malAdministration is now taking a hard line, refusing to protect the nearly 1 million enrollees from deportation unless it gets its entire immigration policy enacted.

SChip recipients – this program, which provides medical insurance coverage for over 8 million  lower income children, was allowed to expire on September 30.  Despite assurances from the Congressional GOP that it would be re instituted promptly, nothing has been done.

Puerto Ricans – Unlike Texas, Louisiana, and Florida, which are GOP majority states, the malAdministration never provided prompt aid to the over 3 million Puerto Ricans, and is threatening to withdraw the aid before basic services are restored.

Recipients of Obamacare subsidies – the malAdministration is refusing to make subsidy payments under the ACA to insurers who enroll those who have less than 2.5 times the income of the Federal poverty level, which includes about 7.5 million people who have enrolled under Obamacare.

That’s a total of close to 19,000,000 hostages.

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Healthcare News; ACA and CHIPs

Trump’s Healthcare Executive Order

Trump Signs Executive Order relaxing ACA health insurance rules. About a week or so ago, I had read this elsewhere, mentioned it, and was told there was no way this would happen. Similar to the three attempts to defund the ACA, Trump is doing what he says the Senate could not do and that is to take healthcare insurance away from the citizenry.

More of Trump’s Executive Order down the page.

Children’s Health Insurance Program

Also if you did not know this, the Children’s Health Insurance Program is being held hostage by the House. Rather than pass a clean bill, the House Republicans added provisions to the passage of new funding. 2017 CHIP Program funding was used up during the time period when Republicans were spending inordinate amounts of time trying to defund the ACA rather than attending to other needs of the country. Some states such as Minnesota have already run out of funds to pay for the 9 million children in the US who are dependent on this program; however, nothing appears to get in the way of the House working on a Tax Reform Budget Resolution giving $billions to 1% of the households making >$500,000 annually.

One provision put in place by Michigan Congressman Fred Upton is nonsensical and strictly for show. Mind you, Fred Upton was one of two Congressmen who tampered with the Risk Corridor Program causing premiums to rise for those in the individuals market place with incomes > 400%, Coops to go bankrupt, insurance companies to lose money, and insurance companies to withdraw from the exchanges. Today Mr. Upton proposes to increase Medicare payments for those making >$500,000 annually saying it will help offset the cost of CHIPs, these oldsters can afford it, and if they do not like it . . . do not sign up for Medicare.

Upton’s statement is cold hearted and mean except for the extra $135/ month means testing the “few” would endure. In the US there is ~1 million household with incomes in excess of $1 million annually. Few of them are old enough for Medicare and the return from the Republican proposed tax reform would more than outweigh the additional $135/month.

The Impact of Trump’s Healthcare Executive Order

President Trump’s Executive Order “directs the departments of Treasury, Labor and HHS to consider expanding healthcare coverage through low-cost, short-term health plans that are exempt from Affordable Care Act insurance market rules.” The plans would:

• Be Short Term and up to 364 days as opposed to the ACA’s 90 day limit.

• Would not have to comply with the 10 categories of minimum essential benefits or accept all applicants at the same rates without regard to pre-existing medical conditions.

• Expand access to so-called association health plans allowing employers to band together in healthcare plans and cross state lines.

• Allow the expanded association plans to market to individuals across state lines.

More than likely, the impact of the Executive Order will drive up premiums for those left in the ACA, increase premiums for those with pre-existing conditions, and increase premium costs for older citizens. Much of the increase could be covered by ACA premium subsidies; but, those with incomes > 400% FPL (~10 million) in the individuals market would bear the full cost increase.

Kaiser’s Larry Levitt said; “ Association plans exempt from the ACA can cherrypick healthy people and make coverage unaffordable for those with pre-existing conditions. Insurers will leave the ACA marketplaces as soon as they can or hike premiums a lot.”

The only thing standing in the way of Trump’s Executive Order “easing the ACA’s statutory insurance market rules” from taking place is the legal challenges. As one legal expert posited; “I do not believe you can solve this problem without changing the law. It has to be done by statute, not regulation.”

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Trump Ends CSR Payments Immediately

According to Modern Healthcare:

“In a brash move likely to roil insurance markets, President Donald Trump will ‘immediately’ halt payments to insurers under the Affordable Care Act.

Before sunrise Friday morning, Trump went on Twitter to urge Democrats to make a deal:

‘The Democrats ObamaCare is imploding, massive subsidy payments to their pet insurance companies has stopped. Dems should call me to fix!’

The Department of Health and Human Services had made the announcement in a statement late Thursday. ‘We will discontinue these payments immediately’ said acting HHS Secretary Eric Hargan and Medicare administrator Seema Verma. Sign-up season for subsidized private insurance starts Nov. 1, in less than three weeks, with about 9 million people currently covered.”

This could be devastating to those with incomes less than 250% of the Federal Poverty Limit. It is a direct attack on US citizens by a president who can not get his way politically and is meant to punish citizens and politicians alike for not following his dictates. Let me assure you, the ACA was not imploding and most of the cost issues with it were caused by Republicans such as former Alabama Senator Sessions and Michigan and Colorado Representatives Upton and Kingston tampering with the Risk Corridor Program.

However, what will happen is the differences will be picked up by increases in premium subsidies as I have said previously for those in this category of 138% to 250%. Indeed as the CBO has pointed out, it becomes cheaper in some cases to bump up to a Gold plan for some. See Tables 1 and 2. Net cost of the ACA increases by $31 billion over 10 years.

Trump asserted: “Obamacare is a broken mess. Piece by piece we will now begin the process of giving America the great HealthCare it deserves.”

The only thing broken today is the Presidency as it is occupied by a madman. One has to wonder if this is Trump’s last hurrah before indicted.

At this time, I have no polite words I can print on AB.

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On Richard Thaler Receiving The Nobel Prize

On Richard Thaler Receiving The Nobel Prize

This is a Sveriges Bank Prize in Economic Science in Memory of Alfred Nobel that I should approve of unequivocally, and I do approve of it. Dick Thaler has long been known to be on the list of likely recipients since at least when Daniel Kahneman shared it with Vernon Smith back in 2002, although I sort of thought the award just a few years ago for Robert Shiller would put Thaler’s off a bit. Nevertheless, I approve of behavioral economics, so I was mistaken not see another award being given for it this soon, and with Thaler clearly a deserving and top candidate for it.

Indeed, I am the founding editor-in-chief of a journal called the Review of Behavioral Economics (ROBE), and back between 2001-2010 I edited the Journal of Behavioral Economics and Organization (JEBO). One of Thaler’s most important papers back in 1980, his fourth most cited, “The Pure Theory of Consumer Choice,” in which he introduced the concept of mental accounting, the first item cited by the Nobel committee in announcing his award, and the paper that I know he long considered the one that would get him the prize (which he long expected to receive), was the second paper every published in JEBO, which should make me even more pleased. Indeed, I recognize that there is an important element of justice in his prize given that he “wandered in the wilderness” for many years, publishing in oddball journals such as JEBO in its beginning and Marketing Science and other such, until much later when his ideas became more accepted, and he finally began hitting the top journals. So, he deserves credit for struggling with ideas that were not accepted and helping to make them become accepted, such as through his column in the Journal of Economic Perspectives on “economic anomalies” from 1987-1990, with some people saying he is the first person to get a Nobel for having a column in the JEP, not entirely false that observation.

So why am I not jumping up and down as much as I probably should be and might be? Maybe for me this is like the prize for Paul Krugman, which I also think was deserved, but which I thought should have been shared with others. I think that is kind of what I am thinking, although I recognize that there is a fairly long list of people who might be the others sharing, with such figures as Camerer, Rabin, Loewenstein, Fehr, Gintis, List, and more as possibilities. It is not obvious which of these should be pushed forward to share it with him now. Indeed, if one looks at Google Scholar citations, one finds him somewhat ahead of all those, with over 110,000, while several of those have around 80,000 and none of them more than that. So, they are not far behind, but they are behind, and it is not obvious again, which of them should be pushed ahead of the others.

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